Investment decisions and the soft budget constraint: Evidence from a large panel of Hungarian firms

Emilio Colombo, Luca Stanca

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

12 Citazioni (Scopus)

Abstract

This paper investigates the investment behaviour of a large panel of Hungarian firms in the period 1989-99, in order to assess the impact of institutional and regulatory changes on the efficiency of credit allocation. We find that the role of financial factors for investment decisions has changed significantly after the introduction of major financial reforms, and that firms were affected differently depending on their ownership type. Reforms have hardened the budget constraint of private domestic firms, particularly small ones, and reduced informational problems for foreign-owned firms. State-owned firms remained subject to a soft budget constraint. In particular, small state firms became more sensitive to financial conditions, whereas large state firms were unaffected and kept operating under a soft budget constraint. © The European Bank for Reconstruction and Development, 2006.
Lingua originaleEnglish
pagine (da-a)171-198
Numero di pagine28
RivistaEconomics of Transition
Volume14
DOI
Stato di pubblicazionePubblicato - 2006

Keywords

  • Economics and Econometrics
  • Financial constraints
  • Investment
  • Soft budget constraint
  • Transition

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